What: Shares of semiconductor equipment supplier Axcelis Technologies (ACLS +22.41%) tumbled on Thursday following the company's third-quarter earnings report. While Axcelis beat analyst estimates for both revenue and earnings, guidance for the fourth quarter was well below expectations. At 12:20 Thursday afternoon, the stock was down about 24%.
So what: Axcelis reported quarterly revenue of $79.3 million, up 106% year-over-year and about $1 million higher than analysts were expecting. Axcelis sells ion implantation equipment used in the fabrication of semiconductors, and with the semiconductor equipment business highly dependent on the capital spending of major semiconductor manufacturers, revenue lumpiness is nothing out of the ordinary.
Net income came in at $0.05 per share, flat compared to the second quarter and up from a loss of $0.04 per share during the third quarter of 2014. Analysts expected Axcelis to post a $0.04-per-share profit. Operating expenses barely increased at all despite the revenue increase, leading to vastly improved profitability compared to the same period last year.
Now what: While Axcelis' earnings were solid, the company's outlook for the fourth quarter fell well short of expectations. Revenue is expected to be between $60 million and $65 million, short of an average analyst estimate of $70.3 million, while EPS is expected to be breakeven.
Axcelis isn't the only semiconductor equipment company struggling with weak demand. Capital spending cuts from major customers and weak memory prices have pushed down the stock prices of many of Axcelis' peers, including industry giant Applied Materials (AMAT +4.26%). Applied Materials has seen its stock decline by more than 30% so far this year, and the company expects its revenue to decline by as much as 7% sequentially during its fiscal fourth quarter. Applied Materials will report its fourth-quarter earnings after the market close on Nov. 12.
The good news for Axcelis investors is that the company expects to come out of the current downturn stronger than ever. CEO Mary Puma is optimistic, saying "The rapid adoption of the Purion platform across multiple customers has strengthened Axcelis, allowing us to address the upcoming industry slowdown from a much stronger position. As a result, Axcelis will enter the next upturn with higher market share, a larger and growing customer base, new product capabilities and higher earnings potential."
